EU: Recent Developments

Lord Newby Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Newby]

My Lords, like other noble Lords, I will concentrate my remarks on recent economic developments, particularly on growth. Although the EU is doing many other important things—on climate change, as the noble Lord, Lord Jay, pointed out, or in terms of social measures, as the noble Lord, Lord Monks, has just pointed out—economics has always been at the core of the EU. The extent to which the EU will be seen to succeed or fail will be the extent to which, over the longer term, it has been seen to deliver growth to its populations.

It has been tempting for me to follow a number of noble Lords this afternoon in discussing the twists and turns of the euro crisis, not least because, as Moody’s reiterated on Monday, the biggest single short-term threat to growth in the UK is a failure of the EU to solve that crisis. However, I will resist the temptation because, at the end of the day, nobody within the eurozone is listening to what anybody in the UK is saying about the future of the eurozone. They do not need to listen because we have no lean on them. They have enough on their plate trying to resolve the conflicting pressures that they find themselves under, both domestically and within the eurozone. My only advice on this to the Government, and to the Prime Minister in particular, is that, having succeeded in annoying everybody by the way he behaved with the veto in December, he should not make things worse by publically lecturing the rest of the eurozone on the need for them to sort themselves out as though they were naughty schoolboys and girls, as he did in Davos. It may play well back here, but it has zero impact on what is actually going to happen and merely serves to build up a stock of resentment against the UK which will inevitably reduce our ability to promote our interests on non-eurozone issues.

I strongly agreed with the noble Lord, Lord Mandelson, when he said that the gravitational pull towards the eurozone and the development of its institutions will be at a cost to Britain’s position and influence. That is the long-term position in which we find ourselves, whichever party or parties are in government. For the foreseeable future, the UK must accommodate itself to being outside the mainstream of those discussions. The irony, of course, is that our deficit reduction programme is exactly the kind of thing that the Germans and other north European countries wish to see for the rest of the eurozone. On macroeconomic policy, we are squarely in the middle of that thinking in the EU. That helps to explain why we are far from being the pariah that some of the headlines, particularly in December, have suggested. The challenge and opportunity for the Government for the remainder of this Parliament is how to use the commonality of interest which exists across much of the economic agenda to our best advantage—mainly via the mechanisms of developing the single market and on trade. If we are going to have greater engagement, it will be in those areas that we exercise it, rather than in discussions about the detailed management of the eurozone.

One of the more tangible ways in which this has been happening in recent months is via the so-called “like-minded growth group”, which was established by my colleague Ed Davey while he was at BIS. Launched in the middle of 2011, it initially had 14 members and was later joined by two more, including Germany. Interestingly, of the 16, eight were “euro-ins” and eight were “euro-outs”. The purpose of the group is to agree joint priorities and strategies for delivering core job and growth priorities linked to the development of the single market. Recent months have seen developments which have strengthened this group further. The Italian Government, who were frankly having none of it in their previous incarnation, have, with the advent of Mario Monti, become great enthusiasts for developing the social market. The new Government in Spain are taking a similarly positive view, as are the Government of Romania. You therefore now have a big majority of people and Governments who are prepared to put real impetus behind a positive single market agenda.

Many of the detailed measures under discussion are, of course, extremely arcane, but they all have the potential to increase trade within the EU and therefore promote growth. Some of these issues, like the immensely vexed question of the EU patent, are nearly concluded. One can only hope that, the intellectual problems having been resolved, the practical issue of where the headquarters of the patent court are located does not lead to another decade of delay in sorting this out. Other measures, such as the development of a digital single market, or on the mutual recognition of the myriad professional qualifications, have some way to go, but there is new impetus behind them. Of all of them, here, for many firms, the proposals from the Commission to simplify the EU public procurement rules will be welcome, particularly for SMEs. I would welcome anything that the Minister could, in winding up, say about progress on that matter.

While the single market is going to help to encourage growth via internal trade, the other area that we must put more emphasis on is that of measures to improve external trade. The noble Lord, Lord Lamont, and the right reverend Prelate the Bishop of Guildford referred to Sir Thomas More. Five hundred years ago, Thomas More was sent to Bruges by Henry VIII to conclude a new trade agreement on wool. When he got there, he found that the French were meddling with a new domestic Administration. Problems were so difficult that it took six months before he was able to get anything approaching an agreement. Like all good intellectuals, he did not waste the time and used it to write Utopia. I do not know whether the noble Lord, Lord Mandelson, in the longueur of his time in Brussels as trade commissioner, was similarly penning his chef d’oeuvre but, if so, we very much look forward to seeing it.

Trade has been largely forgotten in recent months. We know that the Doha process has completely run into the sand. However, there are major initiatives ahead—some concluded, as in South Korea, and others under way, as with the EU/India summit this weekend. There are others that are small but potentially immensely significant for the countries involved; for example, the WTO’s agreement this week to preferential trade agreements with Pakistan, a country which needs all the help it can get. It will get it, in part, through having a more resilient economy, driven by trade.

The single market and trade progress slowly. The work is hard and unglamorous. But it is by taking a leading part in areas such as these that the UK, the euro notwithstanding, will remain fully engaged in the EU, to the tremendous benefit of both the UK and the EU as a whole.